Forums › ACCA Forums › ACCA TX Taxation Forums › Marginal Tax rate
- This topic has 6 replies, 6 voices, and was last updated 10 years ago by aishaasad.
- AuthorPosts
- October 21, 2013 at 6:27 pm #143320
am struggling to understand how the effective corparation tax rate is 25%, when dealing with marginal companies.
November 18, 2013 at 7:18 pm #14665725% is just a shortcut calculation. (i can’t remember how they work it out)
its the same thing with 24%- marginal relief.November 20, 2013 at 1:22 am #146899when dealing with marginal rate, tax up to the lower limit at 20% then anything remaining above the lower limit tax at 25% this only applies when the main rate of tax is 24%
November 23, 2013 at 1:12 pm #147499I agree this makes no sense to me. When deciding on whether to relieve a loss the rules are reduce at highest rate which in the BPP book states relief at marginal rate first but how is this 25%? If anyone could explain I would be grateful!
November 28, 2013 at 5:19 pm #148340HI,
suppose
taxable total profit /augmented profit =300000
so a company will be a small
300000*20%
CT liabilty=60000if TTP/ AP = 310,000
so a company will be medium
310,000*24%= 74,400
less; 1/100 ( 1500,000-310,000)= 11,900
ct liabilty=62500
thus change in liabilty=2500
change in profit = 10,000
change in terms of percentage = 2500/10,000 ) *100=25%ALTERNATIVE APPROACH : ( should not be used to calculate ct liability for a medium company its just a cross check for my above mentioned calculations)
thus for medium company taking the profit as per above example i.e 310,000
300,000 *20% = 60,000 ( applying a small company rate )
10,000*25%=2500
so total = 62500
but do not use the alternative approach for calculating ct liabilty for medium company in exam!!!!!!!!!
USE THE PROPER METHOD 🙂
if u r confused leave it as it is not important at all………………and all what u should know is that the marginal rate is 25%
hope it helps
KIND REGARDSDecember 2, 2013 at 5:50 pm #149262what happened to the “N/A” part of the marginal relief formula in your example?
i thought it was – 1/100 x (U-A) x N/A
you have only used 1/100 x (U-A)Thanks.
December 3, 2013 at 12:36 am #149349actually i assumed both taxable total profit and augmented profit to be the same as i did not take FII …so i forgot to put that u are right just put 310,000 in numerator and denominator thanks…
best of luck - AuthorPosts
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